I had the good fortune to read a great article on MITSloan Management Review this summer called Why CRM Fails – and How to Fix It. It’ll be an eye-opener, and maybe a threat, for those of you who are caught up in the day to day business of selling CRM software. The reason is simple – while software plays a role in CRM, the research shows what many of us have known for a long time: software is not a solution.
The authors, Stan Maklan, Simon Knox and Joe Peppard point out that “marketers have bet the family silver” on these investments with nothing much to show for it. We can debate CRM definitions or how many cool features Salesforce.com is adding, but until we understand the true under-pinnings of success in the world CRM and social CRM, definitions will be off-target and features will simply make a business more expensive.
Capabilities
To blame technology for the failure of CRM is too simplistic according to the authors, and I agree.
“The problem is more fundamental: Most senior management teams have an unbalanced approach to managing marketing investments, and this is particularly evident in the case of CRM. They focus on the key resources in which they invest capital, such as technology, location and advertising, but ignore the commensurate investment of time, energy and talent to develop the capabilities required to leverage those investments. Of course, this approach to marketing investment is risky. It generates excessive investment before the organization is capable of leveraging it profitably.”
We all invest in things before we really know how to make the best use of them. You can make the case that we should develop our capabilities in using a baseball bat before buying a bat, but that would be ridiculous. When we’re talking about huge capital investments, however, we really need to develop the plan and the capabilities within a networked organization to use technology in the most profitable way; and it’s not simply about incremental returns, it’s about creating value with your customers over the lifetime of the relationship.
Purchasing, installing and flicking the “on” switch to CRM is not enough to create customer loyalty (as many hope). Defining success in terms of (S)CRM has to focused on an organization’s ability to learn from it’s interactions with its customers, responding in new and effective ways as the inputs change over time. Value must be created for both parties (the company and the customer) which in turn makes the relationship the company’s competitive edge.
To achieve this, a company must realize that the investment in the technology is not the driver, only an enabler. These enabling tools must work in conjunction with the well developed capabilities of an organization, and these capabilities are what allow a successful company to continually evaluate customer needs and reconfigure their resources accordingly, over time.
Customer Needs
Worry about your customer’s needs, and realize that while needs may not change that often (some will disagree, including the authors) the level of satisfaction with the available solutions will. That’s what drives new solutions because while a need is fairly static, solutions may not be served fast enough, cheap enough, simple enough, or may become inconvenient as technology changes.
Too many CRM’ers focus on the consumption chain when dealing with their customers as though the technology is a solution. Since we’re talking about why CRM fails, I would point out that the consumption chain is used to design solutions after the true customer needs are defined; outcomes which are currently underserved in the market. Focusing on the purchase, delivery, implementation, setup, use, interface, maintenance, upgrade, etc. of the software makes the huge assumption that the users will know what to do with it once it’s installed. If we can’t count on management to understand the need to invest in capabilities, that leaves the consultants to start talking about this with them. Things change so quickly today, you need to build an organization that can adapt as these changes occur, and then make the appropriate capital investments to support these capabilities.
What Comes Next
There are consultants on the leading edge of this thinking that are doing incredible work with their customers. Unfortunately for the mid-market, this type of consulting appears to be too expensive, too complicated and not easily accessible; at least that’s the way they would look at it, if they were looking for it. The fact is, we need to make a much better effort at communicating this thinking to our clients, and not taking the path of least resistance…and least value. We need to understand, and explain, how investing in the appropriate strategy and capabilities will facilitate a more valuable relationship with their customers throughout its course. We need to lead our customers on this front. Most companies naively view technology as a loyalty builder, but it’s the few companies that do the hard work up front, that will stand out and continually take that next competitive step forward. They may find that they can actually spend less on technology because, after all, they only need what they need. Can you know what you need if you don’t do the hard work?
Defining CRM
“(s)CRM is about building organizational capabilities that effectively react to the change in customers’ unmet needs, re-configuring resources and leveraging the appropriate technology to create value for companies – by creating value for (and with) their customers over the entire life of their relationship together”
There, I hate definitions, but this is the way I view CRM these days. More power to Salesforce.com for adding features and moving more and more upmarket. But in the end, it can’t make you more competitive than the other guy using SFDC, just more expensive than you used to be.
